Can Tesla's $5 Billion Bet Pay Off?

Whether or not the much-publicized “Gigafactory” is successful, Elon Musk’s grand vision of a gargantuan battery plant may turn out to be one of the most ambitious manufacturing efforts in American business history.

The Gigafactory, which came to light less than three months ago, could produce seven times more battery capacity, employ 16 times as many people, and consume about 15 times as much land as today’s biggest battery plants. And, if successful, it might do the unthinkable: Drive battery costs down to a point that would transform electric cars into products for mainstream buyers.

”For the energy storage market, this is probably the most exciting thing that’s ever happened,” Cosmin Laslau, research analyst for Lux Research, told Design News. “No one has ever considered throwing this much money at the idea of mass-producing batteries.”

Tesla’s successful Model S sedan would probably represent only a small portion of the Gigafactory’s potential volume. Most of the factory’s batteries would be used in the forthcoming Gen III mainstream vehicle. (Source: Tesla Motors)

Indeed, no one has thrown this much money at a battery factory, possibly because no company wants to take the kind of gamble that now faces Tesla Motors. For the Gigafactory to reach its goals, the upstart car company has said it will need to sell 500,000 battery-electric cars per year by 2020. Industry analysts believe that translates to about 400,000 sales of the Tesla’s forthcoming Gen III car per year, with about 50,000 Model S sales, and 50,000 Model X sales annually.

Still, most industry analysts who recently spoke to Design News believe the Gigafactory concept is a potentially viable one, even though they doubt that the company can realize its vision of 500,000 sales per year. The idea behind the plant is, in essence, simple. Instead of mining lithium in Chile, sending it to China for processing, transporting it to multiple other locations to build parts of the battery, and then shipping the finished products overseas, Tesla would complete the process in one swoop. Trainloads of raw materials would roll through the factory’s front doors, and finished battery packs would exit out the back. Performing the entire operation in one locale would save transportation costs, all the way through the supply chain.

Tesla’s goal is to produce about 35 GWh of battery cells every year -- about seven times more than Nissan manufacturers for its Leaf electric car in Tennessee and 35 times more than LG Chem makes in its Michigan-based factory. It would also produce about 15 additional GWh worth of finished packs by buying cells from other suppliers.

Questions about those numbers loom large, however. Some experts believe that the economies of scale will dwindle after a few gigawatt-hours-per-year of battery production. Beyond that point, they say, more automated production equipment wouldn’t help. ”If I buy 1 GWh per year worth of robots, versus 50 GWh per year worth of robots, it’s not going to make much of a difference in pricing,” Jaffe told us.

Battery makers also question why Tesla would build such a factory when some lithium-ion manufacturers are operating at just 20% of capacity. “That’s the point that most battery makers are scratching their heads about,” Jaffe said. “But the answer is that it makes no difference to Tesla. They’re just trying to drive down the cost for their own cars.”

@NadineJ - In a post dated 5/9/2014, 10:08:06, CharlesM was making a series of points about clean energy and government subsidies, etc. In the middle of the post he stated as an unqualified fact: "The federal debt is not a problem." I took issue with that statement, and posted then Senator Obama's quote as my final response.

Panasonic has been Tesla's partner for awhile, NadineJ. Tesla has singlehandedly vaulted Panasonic to the top of the market in sales of EV/hydrid batteries over the past two years. Panasonic now makes 39% of the EV/hybrid batteries, almost all of which are the 18650 variety.

"The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a Sign that the US Government cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. ...Increasing America's debt weakens us domestically and internationally. Leadership means that 'the buck stops here'. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and Grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

And here's an essay written by someone who knows a thing or two about the subject, wherein it's explained that if this country were to instead focus on ways to increase economic growth, a mere 0.2% growth per year would completely eliminate long term debt.

It's interesting to note that the political party that ran up most the debt would brush aside the problem when they were in power with the excuse that debt was still low as a percentage of GDP, and that they are the champion alarmists when they're out of power. Turns out they are correct that % of GDP is what matters most. They just don't want you to know that when they're not the party that gets to "pick winners and losers."

naperlou makes a good point, as usual. Batteries are critical to EV success. Panasonic's role in downplayed in the press here in the U.S.

I wonder what other companies were in the running and why Tesla chose to partner with Panasonic. Did Panasonic leap on this as an answer to Samsung's partnership with XG Sciences? Why not link up with American LIB manufacturers? There are several.

Some cars are more reliable than others, but even the vehicles at the bottom of this year’s Consumer Reports reliability survey are vastly better than those of 20 years ago in the key areas of powertrain and hardware, experts said this week.

As it does every year, Consumers Union recently surveyed its members on the reliability of their vehicles. This year, it collected data on approximately 1.1 million cars and trucks, categorizing the members’ likes and dislikes, not only of their vehicles, but of the vehicle sub-systems, as well.

A few weeks ago, Ford Motor Co. quietly announced that it was rolling out a new wrinkle to the powerful safety feature called stability control, adding even more lifesaving potential to a technology that has already been very successful.

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